THE strength of the recovery is still to be determined, but there is little doubt that corporate activity is on the rise and some big names could be changing hands.
Investment is always subdued during uncertain times and valuations are difficult to assess. The knock-on effect has been severe among the advisory community starved of the flow of mergers and acquisitions that preceded the crash. Lawyers have been particularly impacted and, ironically, many have been forced to find merger partners of their own.
The second half of the year, however, saw a notable shift in sentiment across a number of sectors. Company boards are now looking to release the piles of cash they have been hoarding.
One of the likely trends this year will be a return of investor appetite for flotations and other financing measures to support company expansion. There is already evidence of demand. A queue of companies is forming at the doors of the City as more firms plan to issue shares encouraged by the success of the Royal Mail (aside from the arguments over its valuation) and others such as Merlin Entertainments.
This latter company is among those listed by its private equity-backed owners, a sector which has enjoyed a near-20 per cent rise in the value of its shares this year. It may persuade Blackstone, owner of Edinburgh-based housebuilder Miller Group, to bring forward a £400 million flotation, one of a number of options it is pondering.
Talk of M&A activity is widespread, another indication of a broad economic recovery. If Miller heads to market it will be following Crest Nicholson, which floated in February. Estate agencies Foxtons and Countrywide also went public.
Oil and gas has been one of the more active M&A sectors with rich pickings still available in the north of Scotland. The evolving changes in media and telecommunications point to a number of deals. Vodafone is said to be weighing an offer for BSkyB, though some are pointing to a tie-up on mobile-phone contracts.
Among the likely big players in this shuffling of corporate ownership are the sovereign wealth funds, mainly in the Middle East and Asia. They may have missed out on the biggest bargains at the depths of the recession but, like everyone else, they have waited for valuations to settle and debts to be cleared. There were rumours of a bid from Qatar for Marks & Spencer and informal talks took place between the Abu Dhabi Investment Authority and Royal Bank of Scotland.
It has long been my view that once the economy kicks off, these funds – together with the cash-rich Chinese – will mop up large chunks of British and other western assets, whether to gain control or buy substantial stakes in the rebalancing of the global economy.
Next year may be the time for them to make their move as they will not want to buy at silly prices. The value placed on loss-making social media company Twitter shows how the markets can get ahead of themselves and do inexplicable things that run the risk of another bubble.
Unless, of course, someone knows something that has eluded the rest of us. And that’s how money is made.
Waste policy is food for thought
NEW regulations on recycling come into force this week that will affect every business in Scotland. Yet a survey this month showed that a third are not aware of the requirements from 1 January to separate recyclable materials – plastic, glass, metal, paper and card – for collection.
The Scottish Government is committed to a zero-waste policy, which is commendable, though streets are already awash with bins overflowing with a mix of refuse. Are there to be other bins scattered along already congested pathways? And how many businesses will comply with this policy?
The Waste (Scotland) regulations will be enforced by the Scottish Environment Protection Agency together with local authorities. Those who flout the new law risk a maximum £10,000 fine.
I wish the authorities luck. In fact, they need to go further. What about tackling the scandalous disposal of perfectly good food by supermarkets and other food chains? Every day they throw away tonnes of edible food simply because it is past its sell-by date. It was once distributed to the hungry and poor. Sadly, the health police intervened. Now people are denied good food which instead goes to the tip.